HOUSE prices fell by 0.2% during February following a strong rise the previous month, Nationwide Building Society said today.

The fall, which followed a 1.5% increase in January, left the average house in the UK costing é158,478.

The annual rate of house price inflation also eased during the month to stand at 3.7%, down from 4.4% in January.

But despite the dip, Nationwide said house prices had still increased by 2% during the previous three months.

The pattern of a strong rise followed by a slight fall is similar to one reported by Halifax, which showed house prices dropping by 0.4% in January, following a rise of 0.9% in December.

Britain's biggest mortgage lender said a mixed pattern of house price rises in some months followed by falls in others was typical of a slow market.

Nationwide said the prospects for house prices would become clearer as the market entered the traditional house-buying season in March.

Greg Fuzesi, Nationwide's senior economist, said: "It will also show whether February's fall is just a pause before the spring rush or the first sign of weak market fundamentals weighing down on prices.

"We expect the weaker economic factors to begin to dominate over the next two to three months and to prevent strong house price rises in 2006."

The group said the pick-up in activity this spring may not be strong because first-time buyers, who are one of the big drivers of house price increases, continued to be priced out of the market.

Uncertainty

At the same time, it said uncertainty about the strength of the economy might cause some people to put off house-buying decisions.

But it added that one complicating factor was buy-to-let investors, who seemed to have been behind some of the recent increase in activity in the market, and they made forecasts more difficult.

Mr Fuzesi said: "The strengthening of the housing market over the last six months does not detract from underlying weaknesses.

"Affordability among first-time buyers remains stretched and continued uncertainty over the economy's strength makes strong rises in house prices over the coming months unlikely.

"While high current levels of mortgage approvals still suggest the existence of some demand pressure in the market, February's 0.2% fall in house prices is a reminder that fundamental drivers remain weak."